Waste Management Consulting, Recycling & Logistical Solutions

Profit Decline Forces Cities to Examine Recycling Services

Not long ago, cities were getting top dollar for recyclable materials. But the demand for those materials has decreased, and so have profits. As a result, North Texas cities are weighing changes to their programs. Demand for recycled materials such as glass and cardboard has taken a nosedive in recent months, pinching cities and recyclers that rely on the sale of those materials to make a buck.

Many communities have used their recyclables to make a little extra cash. Those days are over, at least for now. Dallas is considering storing its recycled materials until the economy rebounds. Plano, Texas has seen its recycling profits fall by 75 percent recently. Fort Worth, Texas which in the past has churned out up to $2 million in annual profits from its operation, now faces the prospect of losing money. Irving and Richardson Texas are bracing for similar squeezes.

“I don’t think there’s a city out there that’s not facing these issues,” said Kim A. Mote, Fort Worth’s assistant director of environmental management. Gauging exactly how the situation might affect homeowners and businesses is hard because every city handles recycling differently. The widest impact may be higher residential sanitation fees for many in the not-too-distant future. Most cities combine trash and recycling into one fee, charging residents on average between $10 and $15 a month.

In a worst-case scenario, cities might cut back or even suspend service. “Something’s got to give,” said Greg A. Roemer, president of Community Waste Disposal of Dallas, which serves 11 North Texas cities. “The longer this goes on, the more we will be pushed to go to our municipalities and renegotiate our rates.”

Shrinking demand

The logic works like this: People are buying fewer goods, which has slackened the demand for all sorts of materials, such as office paper and cardboard for packing. As a result, prices on those materials have fallen and the items you put in the recycle bin are worth less.

In the past few months, the value of commodities like newspaper and aluminum has fallen 50 percent or more. Cardboard, which cost $100 a ton not long ago, now costs about $40, said Will Flower of Republic Services, an Arizona firm that serves many North Texas cities. Such price drops have happened before, most notably in the 1990s when the price of paper skyrocketed and then tumbled.

But the current price plummet appears to be far more widespread. As recycling has become more prevalent and companies have begun shipping what they process overseas, the industry has blossomed into a multibillion dollar trade closely tied to the health of the world economy.

“Once you throw that aluminum can into the bin, you become part of the global commodities market,” said Ed Skernolis, acting executive director of the non-profit National Recycling Coalition in Washington, D.C., an advocacy group.

The industry’s rise has coincided with a trend by many cities to enter revenue-sharing agreements with recycling companies to makemoney on your cans and cardboard.

Many cities, such as Fort Worth and Plano, plow that extra cash back into their recycling operations in an effort to keep fees lower. But the blue bin bubble has since burst. Dallas started collecting cash on its recyclables under a new contract in 2006. The past two years were lucrative, with the city generating $3 million in revenue in that time. The money helped defray the $7 million annual cost to run its program. This year, the city will probably make far less, said Cheritta Johnson, assistant sanitation director for Dallas. One idea being floated: Storing the materials at city warehouses in the hopes that prices will recover. “If the market continues its downward trend, we have options,” she said.

In Plano, recycling profits rose from about $460,000 in 2002 to $1.3 million last year. But because of the downturn, the city is on pace to collect $350,000 this year. A prolonged squeeze could force the city to raise recycling fees, said Nancy Nevil, Plano’s sustainability and environmental services director.

Drastic measures

The impact in a few communities beyond North Texas has been more severe. Last month, officials in West Virginia’s Kanawha County told residents to hold onto their recyclables because the local warehouses were full of unsold material. Other cities are debating slashing their programs. And recycling companies from Oregon to New Jersey are scaling back on services and trimming staffs. Still, some say they expect few changes to recycling programs or habits in the long term.

“What is our main objective: to make money or to be good environmental stewards? It is to be good environmental stewards,” Johnson of Dallas said.

Jerry Ortega, director of public services for Richardson, said his city’s budget has yet to take a hit. But he is preparing for the worst.

“We thank our lucky stars so far, but we think the economy is going to catch up with us.”